FS weekly highlights—28 March 2019

In this issue

 

Brexit news
Brexit legislation
UK regulator updates
European regulator updates
International regulator updates
Prudential requirements
Financial inclusion
Financial crime
Enforcement and redress
Markets and trading
MiFID II
Regulation of capital markets
Regulation of derivatives
Investment funds and asset management
Banks and mutuals
Consumer credit, mortgage and home finance
Insurance and pensions
Payment services and systems
FinTech and virtual currencies
Sustainable finance
Dates for your diary

 

Brexit news

 

FCA director on Brexit risks and the UK’s future relationship with Europe

The Executive Director of International at the Financial Conduct Authority (FCA), Nausicaa Delfas, has given a speech at the 4th UK Financial Services Brexit Summit, setting out the FCA’s preparations for exit from the EU, its expectations of firms, and the implications for consumers. Ms Delfas also looked at residual risks, and the UK’s future relationships on the global stage.

FCA develops UK Benchmark Register for no-deal Brexit

The FCA announced that it has developed a new UK Benchmarks Register, which will replace the European Securities and Markets Authority (ESMA) Register if the UK leaves the EU without an implementation period. The new Register will be the public record of UK supervised users, and UK and third-country based benchmark administrators that want their benchmarks to be used in the UK.

FCA extends TPR until the end of 11 April 2019

The FCA has updated its webpage, ‘The temporary permissions regime for inbound passporting European Economic Area (EEA) firms and funds–our approach’. The FCA states that in light of the fact that the European Council and the UK government have decided on a short delay to the process of the UK’s withdrawal from the EU, the FCA intends to extend the notification window for the temporary permissions regime (TPR) until the end of 11 April 2019.

ESMA registers UnaVista TRADEcho B.V. as a trade repository

ESMA, the EU supervisor of trade repositories (TRs), has registered UnaVista TRADEcho B.V. as a TR under the European Market Infrastructure Regulation, with effect from 25 March 2019. The registration is part of the London Stock Exchange Group’s response to a possible no-deal Brexit. Under this scenario, the UK-based TR of the Group (UnaVista Limited) will cease to be registered with ESMA and UnaVista TRADEcho B.V., based in the Netherlands, will be the TR of the Group operating in the EU27. 

 

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Brexit legislation

 

Delegated Regulations granting post-Brexit exemptions to BoE published in Official Journal

Four Delegated Regulations granting post-Brexit exemptions to the Bank of England (BoE) and other UK public bodies charged with or intervening in the management of public debt have been published in the Official Journal:

The Delegated Regulations were adopted by the European Commission on 30 January 2019. The Delegated Regulations will enter into force on 23 March 2019 and will apply from the day following that on which the relevant legislation ceases to apply to and in the UK.

Investment Exchanges, Clearing Houses and Central Securities Depositories (Amendment) (EU Exit) Regulations 2019

SI 2019/662: This enactment is made in exercise of legislative powers under the European Communities Act 1972, the Financial Services and Markets Act 2000, and the European Union (Withdrawal) Act 2018 (EU(W)A 2018) in preparation for Brexit. This enactment amends UK primary and subordinate legislation in order to ensure that the regulatory regime for recognised investment exchanges, market operators (ie individuals who manage or operate the business of a regulated market, and who may be the regulated market itself), clearing houses (including central counterparties), and central securities depositories (CSDs) continues to be clearly defined and operable in UK domestic law after exit day in a no-deal scenario. It comes into force partly on 26 March 2019 and fully on exit day.

Mortgage Credit (Amendment) (EU Exit) Regulations 2019

SI 2019/656: This enactment is made in exercise of legislative powers under EU(W)A 2018 in preparation for Brexit. This enactment amends UK subordinate legislation and revokes retained direct EU legislation in relation to the EU’s framework of conduct rules for mortgage firms in order to address deficiencies in retained EU law, arising from the withdrawal of the UK from the EU. It comes into force on exit day.

Payment Accounts (Amendment) (EU Exit) Regulations 2019

SI 2019/661: This enactment is made in exercise of legislative powers under EU(W)A 2018 in preparation for Brexit. This enactment amends UK subordinate legislation and revokes retained direct EU legislation in relation to payment accounts regulation arising from the withdrawal of the UK from the EU, ensuring the legislation continues to operate effectively at the point at which the UK leaves the EU. It comes into force partly on 26 March 2019 and fully on exit day.

Insurance Distribution (Amendment) (EU Exit) Regulations 2019

SI 2019/663: This enactment is made in exercise of legislative powers under EU(W)A 2018 in preparation for Brexit. This enactment amends retained direct EU legislation relating to the Insurance Distribution Directive 2016/97/EU of the European Parliament and of the Council of 20 January 2016 on insurance distribution in order to address deficiencies in retained EU law, arising from the withdrawal of the UK from the EU. It comes into force on exit day.

Securitisation (Amendment) (EU Exit) Regulations 2019

SI 2019/660: This enactment is made in exercise of legislative powers under EU(W)A 2018 in preparation for Brexit. This enactment amends subordinate legislation and retained direct EU legislation in relation to Regulation (EU) 2017/2402 of the European Parliament and of the Council of 12 December 2017 in order to address deficiencies which arise from the withdrawal of the UK from the EU. This enactment also amends Regulations (EC) 1060/2009, (EU) 648/2012, (EU) 575/2013 and (EU) 2017/2401 and Delegated Regulation (EU) 2015/61 as well as making necessary changes to relevant UK law, ensuring the legislation continues to operate effectively at the point at which the UK leaves the EU. It comes into force on exit day.

European Union (Withdrawal) Act 2018 (Exit Day) (Amendment) Regulations 2019

SI 2019/Draft: This draft enactment is laid in exercise of legislative powers under EU(W)A 2018 in preparation for Brexit. This draft enactment proposes to amend the definition of ‘exit day’ in section 20(1)of EU(W)A 2018 from 29 March 2019 at 11 pm to 22 May 2019 at 11 pm, if the negotiated withdrawal agreement has been approved by the House of Commons by 11 pm on 29 March 2019, or to 12 April 2019 at 11 pm if the negotiated withdrawal agreement has not been approved by the House of Commons by 11 pm on 29 March 2019 and consequently amends section 20(2) of EU(W)A 2018. Amending the definition of exit day will ensure the correct functioning of the domestic statute book and avoid a discrepancy between UK law and EU law on 29 March 2019 at 11 pm. It comes into force immediately after these draft Regulations will be made.

Benchmarks (Amendment and Transitional Provision) (EU Exit) Regulations 2019

SI 2019/657: This enactment is made in exercise of legislative powers under EU(W)A 2018 in preparation for Brexit. This enactment addresses deficiencies in retained EU law which arise from the UK leaving the EU, specifically in relation to EU Regulation (EU) 2016/11 and related EU tertiary legislation—namely, Commission Implementing Regulation (EU) 2016/1368 and Commission Delegated Regulations (EU) 2018/64, 2018/65, 2018/66 and 2018/67. It comes into force on exit day.

Financial Services and Markets Act 2000 (Amendment) (EU Exit) Regulations 2019

SI 2019/632: This enactment is made in exercise of legislative powers under the European Communities Act 1972 and EU(W)A 2018 in preparation for Brexit. This enactment amends and revokes provisions of UK primary and subordinate legislation in relation to financial services and markets in order to address deficiencies arising from the withdrawal of the UK from the EU, ensuring that the UK’s financial services legislative framework continues to operate effectively where the UK leaves the EU. These Regulations are intended to apply in the event that no deal is reached on the UK’s withdrawal from the EU. It comes into force partly on 23 March 2019 and fully on exit day.

Sanctions Regulations (Commencement No 1) (EU Exit) Regulations 2019

SI 2019/627: This enactment is made in exercise of legislative powers under the Sanctions and Anti-Money Laundering Act 2018 in preparation for Brexit. This enactment brings into force provisions of certain sanctions regulations which have been made under EU(W)A 2018 in relation to international sanctions in the UK. It comes into force on 22 March 2019, 23 March 2019 and 25 March 2019.

Chemical Weapons (Sanctions) (EU Exit) Regulations 2019

SI 2019/618: This enactment is made in exercise of legislative powers under the Sanctions and Anti-Money Laundering Act 2018 in preparation for Brexit. This enactment revokes provisions of UK subordinate legislation and retained direct EU legislation in relation to chemical weapons sanctions to ensure that the UK can operate an effective sanctions regime in relation to the use and proliferation of chemical weapons after the UK leaves the EU. When these Regulations come into force they will replace, with substantially the same effect, the EU sanctions regime concerning restrictive measures against the proliferation and use of chemical weapons which is currently in force under EU legislation and related UK regulations. It comes into force in accordance with regulations made under section 56 of EU(W)A 2018.

European Union (Withdrawal) Act 2018 (Consequential Modifications and Repeals and Revocations) (EU Exit) Regulations 2019

SI 2019/628: This enactment is made in exercise of legislative powers under EU(W)A 2018 in preparation for Brexit. This enactment amends and revokes UK primary and subordinate legislation in relation to EU(W)A 2018 in order to ensure that the UK statute book accommodates retained EU law, a new body of domestic law introduced by EU(W)A 2018, coherently and effectively after the UK’s withdrawal from the EU. It comes into force partly on 22 March 2019 and fully on exit day.

Uncertificated Securities (Amendment and EU Exit) Regulations 2019

SI 2019/679: This draft enactment is laid in exercise of legislative powers under the European Communities Act 1972, the Companies Act 2006, and EU(W)A 2018 in preparation for Brexit. This draft enactment amends UK primary and subordinate legislation and retained direct EU legislation in light of Regulation (EU) 909/2014 as implemented in the UK via the Central Securities Depositories Regulations 2014 and the Central Securities Depositories Regulations 2017, referred to as ‘the CSDR regime’. These amendments are predominantly to reflect the fact that, with the introduction of the CSDR regime, operators of relevant systems will obtain this status by virtue of obtaining authorisation or recognition as a CSD, rather than the previous route of applying under the Uncertificated Securities Regulations 2001, and to ensure the UK retains an operative regulatory framework for uncertificated securities post-exit in the event of a no-deal scenario. 

 

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UK regulator updates

 

FCA responds to Treasury Committee regarding LC&F

The FCA has written to the chair of the Treasury Committee, Nicky Morgan MP, in response to her letter dated 19 March 2019 calling on the FCA to investigate the events at London Capital & Finance (LC&F), which went into administration in January 2019. The FCA acknowledges that there are significant questions about the adequacy and operation of the current regulatory regime relating to the issue and marketing of retail mini-bonds, and confirms that the FCA Board will be considering the LC&F case at its meeting next week.

FCA’s March 2019 Regulation round-up highlights GI complaints-handling failures and delay to Brexit MiFID IT switch-over

The FCA has published its March 2019 Regulation round-up providing a monthly update on the latest news that affects the financial services sector. The round-up contains hot topics concerning recent action the FCA has taken to address unclear and excessive motor finance costs, published guidance to help firms prepare for the Senior Managers and Certification Regime (SM&CR) and highlights complaints-handling failures by general insurance (I) firms. The round-up also announces that the FCA will not switch over its IT systems to replace ESMA’s MiFID systems on the weekend of 30/31 March 2019.

Mark Carney updates Treasury Committee on BoE diversity issues

The governor of the BoE, Mark Carney, has written to the chair of the Treasury Committee, Nicky Morgan MP, setting out the latest actions that the BoE is taking to maintain momentum regarding its diversity and inclusion agenda, particularly those elements most relevant to black, Asian and minority ethnic (BAME) employees. The letter follows up on Mr Carney’s evidence session at a Committee hearing on 26 February 2019. 

 

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European regulator updates

 

European Commission welcomes political agreement on a stronger and more integrated European supervisory architecture, including on anti-money laundering

The European Commission has issued a press release welcoming the political agreement reached by the European Parliament and Member States on the core elements of the reform of European supervision in areas of EU financial markets, including when it comes to anti-money laundering. The Commission believes this is an important step to achieve the capital markets union’s objective to ensure stronger, safer and more integrated financial markets to the benefit of European consumers, investors and businesses.

Andrea Enria delivers introductory statement to ECB annual review

The chair of the ECB, Andrea Enria, has delivered the introductory statement on the ECB annual report on supervisory activities to the European Parliament’s Economic and Monetary Affairs Committee (ECON). Mr Enria said if there was one key lesson in the area of financial supervision in 2018, it was that the EU framework for fighting money laundering and terrorist financing requires further improvement.

ECB director calls for supervisory independence to be strengthened

Ignazio Angeloni, a member of the supervisory board of the European Central Banks (ECB), has given a speech on supervisory independence at the ECB colloquium ‘Challenges for supervisors and central bankers’ in Frankfurt am Main. Although it is now widely accepted that bank supervisors need to be independent, he said that supervisory independence is very difficult to put into practice, and more needs to be done to make it a reality. 

 

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International regulator updates

 

IOSCO work program for 2019 includes crypto-assets, RegTech and AI

The International Organisation of Securities Commissions (IOSCO) has published its work program for 2019, setting out its plans across its five key areas of focus: structural resilience of capital markets; data gaps and information sharing; new insights into investor protection; the role of securities markets in capital formation; and financial innovation.

FSB publishes feedback on effects of financial regulatory reforms on SME financing

The Financial Stability Board (FSB) has published the responses it received to its request for feedback from stakeholders on the effects of financial regulatory reforms on the provision of financing to small and medium-sized enterprises (SMEs), published on 25 February 2019. The FSB’s evaluation was part of its wider examination of the effects of the G20’s programme of post-crisis reforms on financial intermediation.

Chair of the FSI discusses milestones and priorities

The Bank for International Settlements has published a speech delivered by the chair of the Financial Stability Institute (FSI), Fernando Restoy, at the FSI’s 20th anniversary conference, ‘A cross-sectoral reflection on the past, and looking ahead to the future’, in Basel on 12 March 2019. Mr Restoy reviewed some of the key achievements in the FSI's history discussed current and future priorities.

 

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Prudential requirements

 

BCBS reviews LCR follow-up actions

The Basel Committee on Banking Supervision (BCBS) has published overviews of follow-up actions taken or planned by member jurisdictions as of end-2018 to address deviations from the Basel standards identified as part of the Committee's Regulatory Consistency Assessment Programme. The follow-up actions pertain to assessments of risk-based capital and liquidity coverage ratio (LCR) regulations that were completed and published as of end-2017. 

 

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Financial inclusion

 

HM Treasury and DWP publish progress report on financial inclusion

The government has published its first annual report on its progress on financial inclusion. The publication of the report marks the first year since the Financial Inclusion Policy Forum (FIPF) was established. The report says FIPF ‘is already making an important impact’. 

 

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Financial crime

 

Treasury Committee publishes supplementary evidence for economic crime inquiry

The Treasury Select Committee has published supplementary evidence it has received in its inquiry into economic crime, following the hearing on 13 February 2019. Further detail on issues raised was provided by the City of London Police, Nationwide and UK Finance.

OECD Working Group assesses UK implementation of the Anti-Bribery Convention

The Organisation for Economic Co-operation and Development (OECD) has published the UK’s follow-up report on implementation of the OECD’s Anti-Bribery Convention, together with the summary and conclusions of the OECD Working Group on Bribery. While the Working Group notes some improvements, it says that more needs to be done to implement the OECD’s recommendations. 

 

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Enforcement and redress

 

SFO announces successful prosecution for EURIBOR manipulation

The Serious Fraud Office (SFO) has announced that former Barclays banker Carlo Palombo was convicted of manipulating the Euro interbank offered rate (EURIBOR). Former manager of the liquidity management portfolio at Barclays Bank, Sisse Bohart, was acquitted. The trial follows an investigation and prosecution brought by the SFO.

Court of Justice: JPMorgan Chase and Crédit Agricole lose appeals against publication of the Commission's EURIBOR cartel decisions

On 21 March 2019, the Court of Justice published two orders refusing JPMorgan Chase and Crédit Agricole's appeals against the General Court order of 25 October 2018 in Case T-420/18 R JPMorgan Chase and Others v Commission which dismissed their application seeking, among other things, an order requiring the Commission to refrain from publishing its infringement decision of 7 December 2016 in Case AT.39914—Euro Interest Rate Derivatives (EIRD) when the Commission imposed fines totalling €485m on three banks that did not settle, Crédit Agricole, HSBC and JPMorgan Chase, following an earlier decision to impose fines totalling €824m (as amended) on four other banks after a settlement announced in December 2013. The General Court found, among other things, that publication of the EIRD decision is not liable to damage the reputation of identifiable individuals.

Record £28M fine for UBS puts compliance staff on guard

Last week’s record £27.6m ($34.8m) fine against UBS for misreporting 136 million transactions has underlined the need for banking compliance teams to focus on their trading desks if they hope to avoid falling foul of Europe’s formidable securities rules.

Pensions company fined £40,000 for sending spam emails

The Information Commissioner’s Office (ICO) has fined a Kent pensions company for sending nearly two million spam emails. Grove Pension Solutions Ltd was fined £40,000 for sending 1,942,010 direct marketing emails promoting its services, without consent. An ICO investigation found that Grove Pensions Solutions Ltd instructed a marketing agent to use third party email providers to carry out hosted marketing campaigns that advertised its services. The company sent the emails between 31 October 2016 and 31 October 2017, relying on misleading advice from a data protection consultancy as well as independent legal advice that proved inaccurate and in breach of regulations.

Treasury Committee publishes correspondence with FOS on treatment of vulnerable customers under Equality Act 2010

The Treasury Committee has published a letter dated 18 March 2019 from the chief ombudsman and chief executive of the Financial Ombudsman Service (FOS), Caroline Wayman, to Treasury Committee chair Nicky Morgan MP regarding the requirement to make reasonable adjustments for vulnerable customers under the Equality Act 2010. The Committee has also published a letter from Ms Morgan to Ms Wayman dated 4 March 2019, asking five questions to which Ms Wayman’s letter responds.

 

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Markets and trading

 

SFTR level 2 measures published in the Official Journal

A package of level 2 measures under the Securities Financing Transactions Regulation (SFTR) has been published in the Official Journal. The following delegated and implementing acts have been published:

The regulations will enter into force on 11 April 2019.

BoE publishes minutes of working group on sterling risk-free reference rates

The BoE published the minutes of the February 2019 meeting of the working group on sterling risk-free reference rates. The group, which is made up of experts from major sterling swap dealers, discussed the progress made in the transition from LIBOR to SONIA reference rates. The group now aims to finalise its work by taking actions to help determine the applicability of term SONIA reference rates (TSRR) for specific market segments and end-users.

ESMA publishes the first Q&As relating to the Prospectus Regulation

ESMA has published a new document containing nine Q&As relating to Regulation (EU) 2017/1129 (the Prospectus Regulation). ESMA is publishing these Q&As in a new document in order to separate them from the Q&As published in relation to the Prospectus Directive. The purpose of these Q&As is to promote common supervisory approaches and practices in the application of prospectus supervision. These Q&As are also intended to facilitate market parties by providing guidance as to how national competent authorities will interpret the Prospectus Regulation.

ESMA report notes EU accounting enforcers focus on new IFRS standards and non-financial information

ESMA published its annual report on the enforcement and regulatory activities of accounting enforcers within the EU (European enforcers). ESMA says its efforts (and the efforts of European enforcers) in 2018 to deepen convergence in the enforcement of financial information particularly focused on the harmonisation of the application and enforcement of new IFRS standards 15 (Revenue from Contracts with Customers) and 9 (Financial Instruments) as announced in the 2017 ESMA common enforcement priorities.

 

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MiFID II

 

ESMA publishes MiFID II compliance table on transaction reporting, order record keeping and clock synchronisation guidelines

ESMA published a compliance table on the guidelines on transaction reporting, order record keeping and clock synchronisation under MiFID II (ESMA/2016/1452) (ESMA guidelines). It sets whether competent authorities comply or intend to comply with these ESMA guidelines.

ESMA updates Q&A on MIFID II and MIFIR commodity derivatives topics

ESMA has updated its Q&As on MiFID II and MiFIR commodity derivatives topics. The update relates to ancillary activity and a question as to whether all legal entities that deal in commodity derivatives within a financial group need to be individually authorised as investment firms. ESMA answered in the affirmative.

ECON publishes amendments to proposed directive making crowdfunding amendments to MiFID II

The European Parliament has published amendments by ECON to the Commission's proposal for a Directive amending MiFID II in the light of the proposed Crowdfunding Regulation.

ESMA agrees position limits under MiFID II

ESMA has published seven opinions regarding commodity derivatives under MiFID II and MIFIR). ESMA’s opinions agree with proposed position limits for:

 

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Regulation of capital markets

 

ECB aligns disclosure requirements for Securitisation Regulation and collateral framework

The ECB has announced that the eligibility requirements for loan-level data reporting in the Eurosystem collateral framework will be adjusted to reflect the disclosure requirements of the EU Securitisation Regulation (EU) 2017/2402. The eligibility criteria for asset-backed securities (ABSs) will change at a future date, depending on the fulfilment of certain conditions. In addition, new loan-level data requirements will be phased in gradually and will facilitate the continued eligibility of transactions fulfilling current reporting standards.

ESMA publishes taxonomy for the European Single Electronic Format RTS

ESMA has published the taxonomy files to facilitate implementation of the requirements set out by the draft regulatory technical standard (RTS) on the European Single Electronic Format (ESEF). The taxonomy is in the form of a set of electronic XBRL files that are available in a machine-readable and freely downloadable format.

ESMA recommends changes to Commission’s proposed climate-related update of reporting guidelines

ESMA published its response to the European Commission’s consultation on the revision of its non-binding guidelines on non-financial reporting to reflect climate-related disclosures. In its response, ESMA sets out its recommendations on how to further develop the guidelines to promote higher quality disclosures.

ESMA compliance table for guidelines on the enforcement of financial information

ESMA has published a compliance table for the guidelines on the enforcement of financial information under the Transparency Directive (ESMA/2014/1293). According to the table, Austria, Bulgaria, Germany and Slovenia do not comply, while Croatia intends to apply. All other Member States and the EEA States (Iceland, Liechtenstein and Norway) comply.

Better Finance sets out key priorities for the next five years 2019-2024

Better Finance, the European federation of investors and financial services users, has published a document setting out its key priorities for the years 2019 to 2024. According to Better Finance, a strong European capital markets union (CMU) requires the trust of citizens as individual investors, policy holders, pension savers and other savers. And defusing the pensions time bomb requires positive and decent, real long-term returns to pension savers. Those can only be reached by increasing the attractiveness of the EU capital markets to the benefit of all market participants.

Council of the EU adopts position on secondary markets for bad loans

The Council of the European Union has adopted its position on secondary markets for non-performing loans (NPLs) in the proposed Directive on credit servicers, credit purchasers and the recovery of collateral. There was, however, no agreement in the Council on the collateral part of the Directive. It is therefore not included in the Council position, and will require further discussion at working level in the Council.

 

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Regulation of derivatives

 

ESMA to renew restrictions on CFDs for a further three months from 1 May 2019

ESMA has issued a press release stating that it has agreed to renew the restrictions on the marketing, distribution or sale of contracts for difference (CFDs) to retail clients, in effect since 1 August, from 1 May 2019 for a further three-month period. ESMA states that it has carefully considered the need to extend the intervention measures currently in effect. ESMA considers that a significant investor protection concern related to the offer of CFDs to retail clients continues to exist. It has therefore agreed to renew the measures from 1 May 2019 on the same terms as the previous renewal decision that started to apply on 1 February 2019.

ECB withdraws initiative on conferral of powers in relation to CCPs

The governing council of the ECB has withdrawn its recommendation to amend Article 22 of the Protocol on the Statute of the European System of Central Banks (ESCB) and of the ECB regarding the extension of its legal competence over clearing and payment systems to central counterparties (CCPs).

ISDA publishes CDM 2.0 for deployment and opens access to entire market

ISDA has published the full version of the ISDA Common Domain Model (CDM) for interest rate and credit derivatives and has opened access to all market participants, including non-ISDA members. The ISDA CDM is the first industry solution to tackle the lack of standard conventions in how derivatives trade events and processes are represented. Developed in response to regulatory changes, high costs associated with current manual processes and a demand for greater automation across the industry, the ISDA CDM for the first time creates a common blueprint for events that occur throughout the derivatives lifecycle, paving the way for greater automation and efficiency at scale.

 

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Investment funds and asset management

 

FCA publishes information for investors as City Financial Investment Company Limited enters administration

The FCA issued advice to investors in funds previously managed by City Financial Investment Company Limited (City Financial). The firm entered administration on 21 March 2019 and the funds it managed have been transferred to a new fund manager or are in the process of being wound down. Jason Baker and Geoffrey Rowley of FRP Advisory LLP (FRP) have been appointed as joint administrators. 

 

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Banks and mutuals

 

HMT publishes findings of independent review of the prudential supervision of The Co-operative Bank Plc

HM Treasury (HMT) has published the findings of the independent review of the supervision of The Co-operative Bank between 2008 and 2013 produced by Mr Mark Zelmer, a former deputy superintendent of the Office of the Superintendent of Financial Institutions, Canada, and previously a senior official at the Bank of Canada. In the report Mr Zelmer recommends that the Prudential Regulation Authority (PRA) and the BoE should continue to evolve their stress test exercises so that they encompass a broad range of risks to which banks are exposed, and consider how best to incorporate the inherent uncertainty that would prevail as a stress scenario unfolds in real life. All the recommendations can be found in Table 2 of the report.

Treasury updates list of designated credit reference agencies for SME regulations

HM Treasury has added Dun & Bradstreet Limited to the list of credit reference agencies (CRAs) designated under the Small and Medium Sized Business (Credit Information) Regulations 2015, SI 2015/1945. The Regulations require designated banks to share information on their SME customers, with the SME’s permission, with designated CRAs, which must provide equal access to this information to all finance providers.

Inquiry into access to financial services in Scotland launched by Scottish Affairs Committee

The Scottish Affairs Committee has begun its inquiry into access to financial services in Scotland with an evidence session featuring representatives of Which?, Citizens Advice and Scottish Rural Action, as well as a member of the Access to Cash Review. The launch of the inquiry follows a finding by Which? that a third of Scottish banks have closed since 2010. In its evidence session, the Committee focused on the impact these closures are having on communities and business across Scotland, and which areas have been most affected. 

 

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Consumer credit, mortgage and home finance

 

FCA publishes Mortgages Market Study final report and consultation paper 19/14

The FCA has published the final report of its Mortgages Market Study (MS16/2.3), which aims to tackle the ‘mortgage prisoners’ problem by proposing changes to how lenders assess whether or not a customer can afford the loan. Alongside the study, the FCA has published consultation paper (CP19/14)‘Mortgage customers: proposed changes to responsible lending rules and guidance’, with feedback sought by 26 June 2019.

FCA submits final report on the retained provisions of the Consumer Credit Act

The FCA has presented to Parliament a final report on the retained provisions of the Consumer Credit Act (CCA) 1974 and whether the repeal of the provisions would adversely affect the appropriate degree of protection for consumers.

FCA publishes speech on what the consumer credit sector can expect from the FCA

The FCA published a speech by its executive director of supervision–retail and authorisations, Jonathan Davidson, at the Credit Summit in London. In the speech, Mr Davidson notes that there has been a lot of change in the consumer credit sector, but the FCA’s focus on affordability, business models and culture hasn’t and won’t change. Two areas of focus for the FCA in the high cost credit sector will be relending and affordability. A healthy, purposeful culture will be the best way to deliver value for firms, their clients and their employees. The Senior Managers and Certification Regime (SM&CR) provides some minimum standards for culture. 

 

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Insurance and pensions

 

FCA’s Dear CEO letter sets out expectations for pension product providers

The FCA published a Dear CEO letter to pension product providers setting out its expectations on managing the risks of harm to consumers arising from the transfer of funds from their defined benefit (DB) schemes to defined contribution (DC) products. In the letter, the FCA outlines what firms need to consider when designing, marketing and providing pension products.

EIOPA publishes guidance and principles for providing information under IORP II Directive

The European Insurance and Occupational Pensions Authority (EIOPA) published a second report on ‘Other Information to be provided to prospective and current members: guidance and principles based on current practices’ in the context of implementing the IORP II Directive (Directive (EU) 2016/2341). The report analyses national practices that existed prior to the implementation of the IORP II Directive on the activities and supervision of institutions for occupational retirement provision (IORPs), addressing in particular documents for obligatory disclosure to prospective members and members in the pre-retirement and pay-out phase.

EIOPA comparative study on market and credit risk modelling under Solvency II

EIOPA published a comparative study on market and credit risk modelling under Solvency II. The report summarises the key findings from the study undertaken in 2018 based on year-end 2017 data and provides an insight into the supervisory initiatives being taken following the conclusions of this study.

HM Treasury consults on implementation of insurer’s duty to pass on PI savings to customers

HM Treasury is consulting on draft regulations which set out the detail of the new requirements placed on insurers to pass on to customers cost benefits arising from reforms to both low value personal injury claims and to the personal injury discount rate. Feedback to the consultation–Civil Liability Act report on savings provision: consultation on implementing regulations–is sought by 3 May 2019.

EIOPA report analyses licencing approaches to InsurTech

EIOPA published its report on ‘Best practises on licencing requirements, peer-to-peer insurance and the principle of proportionality in an InsurTech context’. As part of the European Commission's FinTech action plan, EIOPA’s  report sets out current authorising and licencing approaches to financial innovation. The report also includes an analysis of the approach to InsurTech start-ups operating as peer-to-peer (P2P) insurers.

 

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Payment services and systems

 

PSR sets out budget and plans for 2019/2020

The Payment Systems Regulator (PSR) has published its annual plan for 2019/2020, together with its budget and a factsheet. The PSR says its work in the period will focus more directly on consumers’ experience of payments, having spent its first few years focused on greater access to payment systems and improving the way infrastructure works.

UK consumers lost £1.2bn through payment fraud in 2018

Criminals managed to get away with £1.2bn ($1.57bn) last year through banking and payment scams targeting UK consumers, according to an industry lobby group, which pinned the blame for many of the losses on third-party data breaches.

PSR responds to UK Finance’s annual fraud figures for 2018

The PSR has issued a press release in response to UK Finance’s annual fraud report for 2018 which includes information on authorised push payment (APP) scams. The report shows an increase in the number of APP scams that were committed. According to the PSR, this increase is likely a result of greater awareness of this crime and more effective reporting by additional banks.

 

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FinTech and virtual currencies

 

BoE paper on the future of FinTech

The BoE published its Quarterly Bulletin for Q1 2019, which includes an article that looks at the rise of FinTech and the challenges it presents for the BoE. The paper argues that the implications of FinTech as part of the wider shift to a digital economy are only beginning to be realised, but the potential is substantial. The pace and scale of private sector innovation continues to increase. To support innovation, the paper says the BoE must not only embrace FinTech, but take tangible steps to enable new technology and empower providers in order to promote competition.

EIOPA report analyses licencing approaches to InsurTech

EIOPA published its report on ‘Best practises on licencing requirements, peer-to-peer insurance and the principle of proportionality in an InsurTech context’. As part of the European Commission's FinTech action plan, EIOPA’s  report sets out current authorising and licencing approaches to financial innovation. The report also includes an analysis of the approach to InsurTech start-ups operating as peer-to-peer (P2P) insurers.

 

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Sustainable finance

 

Council of EU invites COREPER to approve final compromise text of proposed Regulation on disclosures relating to sustainable investments and sustainability risks

The Council of the EU has published an ‘I’ Item Note in which it invites the Permanent Representatives Committee (COREPER) to approve the final compromise text of the proposed Regulation on disclosures relating to sustainable investments and sustainability risks as set out in the Addendum to the note, with a view to reaching an agreement at first reading with the European Parliament. COREPER is also invited to give to its chair the mandate to inform the chair of the European Parliament's Economic and Monetary Affairs Committee that, should the European Parliament adopt the text of the proposal in the exact form as set out in the addendum, the Council would adopt the proposed Regulation thus amended, subject to legal-linguistic revision by both institutions.

European Commission hosts high-level conference on a global approach to sustainable finance

The European Commission has hosted a high-level conference on a global approach to sustainable finance. The conference provides the opportunity to foster international co-operation, explore synergies, and demonstrate strong commitment towards a coherent international financial system that supports channeling private capital towards sustainable projects.

Mark Carney lays out BoE’s priorities on climate change

The governor of the BoE, Mark Carney, has said that for markets to anticipate and smooth the transition to a low-carbon economy, they need the right information, proper risk management, and coherent, credible public policy frameworks. Speaking at the European Commission Conference: ‘A global approach to sustainable finance’, he said that reporting needs to improve and that the BoE will expect firms to carry out a scenario analysis to assess risks.

ECON and Environment Committee amends proposed regulation on sustainable investment

The European Parliament has published amendments by the Committee on Economic and Monetary Affairs, and the Committee on the Environment, Public Health and Food Safety, to the report on the establishment of a framework to facilitate sustainable investment.

European Parliament erratum on sustainable investment proposal

The European Parliament has published an erratum to the report on the proposal for a regulation of the European Parliament and of the Council on the establishment of a framework to facilitate sustainable investment (COM(2018)0353–C8-0207/2018–2018/0178(COD)). Amendment 54 is deleted and amendment 53 is modified.

LMA launches Sustainability Linked Loan Principles

The Loan Market Association (LMA), the Loan Syndications and Trading Association, and the Asia Pacific Loan Market Association have launched the Sustainability Linked Loan Principles (SLLP). The SLLP provide a global framework to help identify and understand the key characteristics of sustainability linked loans.

 

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Dates for your diary

 

DateSubjectEvent

 

28 March 2019

 

Prospectus Regulation

 

The deadline for responses to FCA CP19/6: Changes to align the FCA Handbook with the EU Prospectus Regulation is 28 March 2019.

 

28 March 2019Retail investments

As part of its live and local series the FCA will host its interactive workshopon defined benefit pension transfers on 28 March 2019 in Newcastle.

 

28 March 2019Brexit

The deadline for temporary permission notifications to be made to the FCA under paragraphs 3(1)(a) and 15(1)(a) of schedule 3 of the Electronic Money, Payment Services and Payment Systems (Amendment and Transitional Provisions) (EU Exit) Regulations 2018 is 28 March 2019.

 

28 March 2019Brexit

The deadline for temporary permission notifications to be made to the FCA for inbound passporting EEA investment funds is 28 March 2019.

 

28 March 2019Brexit

As per FCA’s PS19/5: Brexit Policy Statement and Transitional Directions, the FCA will publish final instruments to amend the FCA Handbook and Binding Technical Standards on 28 March 2019 if the withdrawal agreement between the UK and the EU is not ratified.

 

29 March 2019

Investment funds

Asset management

The deadline for responses to the Financial Reporting Council’s consultation on the new UK stewardship code is 29 March 2019.

 

29 March 2019Payment systems and services

The deadline for feedback to the European Cards Stakeholders Group consultation on version 8.5 of the Single Euro Payments Area (SEPA) cards standardisation volume and tokenisation considerations for SEPA Card Payments is 29 March 2019.

 

30 March 2019

Brexit

Markets and trading

DTCC Data Repository PLC–DDRL UK will cease to be registered with ESMA on 30 March 2019.

 

30 March 2019Regulatory Architecture

In its ‘Proposal for a Regulation of the European Parliament and of the Council amending Regulation (EU) No 1093/2010 as regards the location of the seat of EBA (First reading)’, the Council of the EU confirms Paris as the location for the EBA and that new premises should be ready and fit for the purpose of permanent relocation by 30 March 2019.

 

30 March 2019EU regulator updates

From 30 March 2019, all meetings of the EBA's governing bodies will be held at the EBA’s new headquarters in Paris.

 

31 March 2019Payment systems and services

The deadline for responses to the European Payments Council’s call for change requests for possible modifications to be introduced into the SEPA Proxy Lookup scheme rulebook is on 31 March 2019.

 

31 March 2019

Investment funds

Wealth management

Statutory deadline for the Competition and Markets Authority investment consultants market investigation.

 

31 March 2019Benchmarks

The deadline for feedback to the ICE Benchmark Administration call for comment on the US Dollar ICE Bank Yield Index and its proposed methodology is 31 March 2019.

 

 

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